A harsh court decision has held that a supply for VAT purposes does not require a contract.
A gun maker was obliged to give up his stock of guns when the Firearms (Amendment) Act 1997 became law. For this he received compensation of £579,315. Customs assessed him for £53,559 VAT for this supply.
The trader appealed, arguing that the surrender of the guns was not a supply. It was not a contract, which is a voluntary agreement, but a compulsory act required by law. The government did not “consume” the goods within the scope of EC directive 67/227. The government had no use for the guns which were destroyed. The transfer of title of guns to the government was merely an incidental step in the scheme.
The court held that the guns were supplied to the government. All that was necessary was for goods to be transferred for consideration, which could include compensation. What the transferee did with goods supplied was not relevant. Any purchaser of goods may then throw them away. That does not affect the VAT treatment.
Parker Hale Ltd v Customs and Excise. QBD [2000]
[2000]